Nobody likes IT services contracts. They’re long, boring and complicated. But yes, you need them. Here are our Top 5 tips for what yours should cover.
- Who owns what? Unless you’re renting out your hardware, if your customer has paid for it, it makes sense for them to own it too. But most hardware won’t work without software, and the software you provide contains valuable IP rights. Make sure you don’t pass on your ownership rights in the software to your customer, a limited licence to use is sufficient.
- What are you actually providing? It’s important to set out clearly what you are and aren’t providing. This enables you to negotiate further fees if your customer requests things outside the original scope (you should also have a good change request process).
- Should I agree to put my software in escrow? While keeping your crown jewels to yourself is preferred, escrow makes sense from your customer’s point of view if the software is critical to the functioning of their business. The risk of exposing your technology to your customer can easily be reduced by imposing restrictions on when and how the software will be released.
- What happens on termination? Alas, all good things come to an end. Consider whether you need a transition period for your customer to move their services. How long will this period be? What will you charge for your assistance? Also, make sure that the customer returns the stuff that you own (especially your software).
- I warrant that... If you’re going to provide warranties, make sure they are true! In any case, you should tie any warranties back to documentation or specifications that you provide to the customer, and make sure that the warranties have an expiry date.